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Pros and Cons of Obama's Stimulus Package

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Pros and Cons of Obama's Stimulus Package

Photo of Grand Canyon trail repair by volunteers aided by stimulus funds: John Moore/Getty Images

Pros

"Pro's" for the Obama administration's $787 billion stimulus package can be summed up in one obvious statement:

If the stimulus works to shock the U.S. economy out of its steep 2008-2009 recession, and stems the unemployment rate, then it will be judged a success.

Economic historians persuasively argue that Keynesian-style spending was largely instrumental in pulling the U.S. out of the Great Depression, and in propelling growth of the U.S. and world economies in the 1950s and 1960s.

Meeting Urgent, Worthy Needs

Of course, liberals also fervently believe that many thousands of urgent and worthy needs... long ignored and exacerbated by the Bush administration... are met by spending initiatives included in Obama's stimulus package, including:

  • Long overdue repair and renewal of dangerously crumbling U.S. infrastructure, including highways and roads, the electric power grid, dams, bridges, levees, water mains and sewer systems, airports, and more;
  • Vital aid to beleaguered local school districts to prevent layoffs and cutbacks, plus $300 million for increased teacher salaries
  • Expansion of public transportation systems, building new high-speed passenger rail systems
  • $116 billion in payroll tax relief for individuals making less than $75,000 annually, and for couples jointly making less than $150,000.
  • $40 billion to extend unemployment benefits, and to increase benefits by $25 weekly
  • Increased medical coverage for military members and their families, and $1 billion for the Veteran's Administration, which suffered major cutbacks under President Bush
  • Food programs for low-income Americans, including $150 million to help refill food banks, $100 million for meals programs for seniors, and $100 million for free school lunch programs.

Cons

Critics of President Obama's stimulus package either believe that:
  • economic stimulus spending is doomed to fail, especially when it entails borrowing to obtain the funds to be spent (i.e. deficit spending); or
  • the "compromise" size or focus of the stimulus bill doomed the measure to be inadequate to pull the U.S. out of the 2008-2009 recession.
Stimulus Spending Coupled with Borrowing Is Reckless

A June 6, 2009 Louisville Courier-Journal editorial eloquently expresses this "con" perspective:

"Lyndon is getting a new walking path between Whipps Mill Road and North Hurstbourne Lane... Lacking sufficient funds, the U.S. will borrow from China and other increasingly skeptical lenders to pay for luxuries like Lyndon's little walkway.

"Our children and grandchildren will have to pay back the unimaginable debt with which we are saddling them. Of course, the fallout from their forebears' financial irresponsibility could first consume them in revolution, ruin or tyranny...

"Obama and congressional Democrats are making an already awful situation exponentially worse... Borrowing from foreigners to build paths in Lyndon is not only bad policy, but ought to also be unconstitutional."

Stimulus Package Was Inadequate or Wrongly Focused

Lamented liberal economist Paul Krugman, "Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn't have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years.

"Yet the centrists did their best to make the plan weaker and worse."

"One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending."

Moderate Republican David Brooks opined "... they've created a sprawling, undisciplined smorgasbord, which has spun off a series of unintended consequences.

"First, by trying to do everything all it once, the bill does nothing well. The money spent on long-term domestic programs means there may not be enough to jolt the economy now... The money spent on stimulus, meanwhile, means there’s not enough to truly reform domestic programs like health technology, schools and infrastructure. The measure mostly pumps more money into old arrangements."

Where It Stands

"Congressional Republicans tore into the Obama administration over the economic stimulus plan,... arguing that the White House is mishandling the distribution of the money while overstating the ability of the package to create jobs," reported CNN on July 8, 2009 about a "contentious hearing before the House Oversight and Government Reform Committee."

CNN continued, "The White House Office of Management and Budget defended the plan, arguing that every federal dollar spent has, by definition, helped to ease the pain of the worst economic crisis since the Great Depression.

A Second Stimulus Package?

Obama economic advisor Laura Tyson, former Director of the National Economic Council, said in a July 2009 speech that "the U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was 'a bit too small'" per Bloomberg.com.

In contrast, economist Bruce Bartlett, a conservative Obama supporter, pens in an article entitled Obama's Clueless Liberal Critics, that "the argument for more stimulus implicitly assumes that the bulk of stimulus funds have been paid out and done their work. However, the data show that very little of the stimulus has actually been spent."

Bartlett argues that stimulus critics are reacting impatiently, and notes that economist Christina "Romer, who now chairs the Council of Economic Advisers, says the stimulus is working just as planned and that no additional stimulus is needed."

Would Congress Pass a Second Stimulus bill?

The burning, relevant question is: Is it politically possible for President Obama to push Congress into passing a second economic stimulus package in 2009 or 2010?

The first stimulus package passed on a House vote of 244-188, with all Republicans and eleven Democrats voting NO.

The bill squeezed by on a filibuster-proof 61-36 Senate vote, but only after making significant compromises to attract three Republican YES votes. All Senate Democrats voted for the bill, except those absent due to illness.

But with public confidence falling in Obama's leadership in mid-2009 on economic matters, and with the first stimulus bill failing to quell unemployment, moderate Democrats can't be relied on to solidly support additional stimulus legislation.

Would Congress pass a second stimulus package in 2009 or 2010?

The jury is out, but the verdict, in summer 2009, doesn't look good for the Obama administration.

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